The people of Corsica yesterday rejected a plan aimed at giving their beautiful but unruly island more autonomy from mainland France - and, Paris had hoped, at ending more than a quarter of a century of separatist violence. It was the first significant policy defeat for France's centre-right government.

The powerful interior minister, Nicolas Sarkozy, who had campaigned hard for a yes vote, said the government had lost the referendum on its plan by 50.98% of votes against to 49.02% in favour of the proposal, which would have streamlined Corsica's political institutions and given a single assembly of 91 locally elected politicians more say over tax, tourism, public services and the environment.

"The government will respect their choice," a stone-faced Mr Sarkozy said on television after the result was confirmed. He had said that if Corsicans rejected the plan, which would also have introduced parity for women in a notoriously macho political culture, "nothing more could be done for the place".

Michel Scarbonci, a leftwing Corsican MEP and one of the leaders of the "no" campaign, said Corsicans had not been not fooled. "Despite all the government's efforts, they have shown that they are fed up with being the laboratory for Paris's decentralisation plans. Above all, they do not believe a simple administrative change will end the violence."

Turnout was higher than for recent general and presidential elections, officials said, with over 60% of the island's 190,000-strong electorate voting. But several commentators suggested the suspiciously wecll-timed arrest on Friday of France's most wanted Corsican separatist, Yvan Colonna, who had been on the run since the 1998 assassination of the island's top French government official, could have backfired on the "yes" campaign.

"It was a blatant public relations manoeuvre aimed at persuading voters that a vote for a single local assembly, elected by proportional representation, would not automatically be playing into the hands of nationalist extremists," said Noel Mamere, a leading Green party politician. "Corsicans, particularly nationalists who might otherwise have voted for the plan, saw straight through it."

Colonna was transferred from the island to Paris yesterday and brought before investigating judges, who placed him under investigation - one step short of formal charges - for murder and links to a terrorist organisation.

The Mediterranean island - an unruly part of France ever since Genoa gave it to Paris in part-payment of a debt in 1768 - has been plagued for the past 28 years by almost daily bombings, machine-gunnings and other mainly symbolic attacks by a small, splintered but highly active nationalist movement.

While less than 10% of the island's 260,000 population actually want full independence from France, very few dare to openly oppose the warring separatist groups, many of which are little more than fratricidal Mafia-style racketeering gangs who have killed more than 100 of their own members in 9,000-odd attacks since 1975.

The tourists would never know it, but Corsica, which relies on them, state aid and civil service employment for economic survival, has long been the most corrupt of all France's departements, swallowing tens of millions of pounds of government and European Union funding with little or nothing to show for it.

The government plan, which polls suggested had the backing of between 51 and 55% of Corsicans, was the first step in a daring venture for France's traditionally highly centralised administration. Other regions, including Brittany, were watching the poll's outcome with interest.

But Corsica, the birthplace of Napoleon Bonaparte, had been causing Paris so many problems for so long that even President Jacques Chirac, an instinctive enemy of autonomy, had taken the substantial political risk of backing the "yes" campaign.

The plan was based largely on proposals drawn up by the previous socialist government of Lionel Jospin in the wake of the most serious separatist attack since the 1976 killing of two gendarmes by nationalist gunmen - the murder in February 1998 of its prefect, Claude Erignac.